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MTD for VAT is now live

Making Tax Digital for VAT (MTD for VAT) is now live. Here, we answer some key questions.

Q: Do all VAT-registered businesses start at once?

A: Each business has its own start date, dependent on its VAT quarters. If your taxable turnover is above £85,000, MTD for VAT rules are compulsory for your first VAT return period starting on or after 1 April 2019

Quarterly filing dates

Start of first return period subject to MTD

First quarter end within MTDfV

First MTD VAT return deadline (month plus 7 days)

March / June / Sept / Dec

1 April 2019

30 June 2019

7 August 2019

Jan / April / July / Oct

1 May 2019

31 July 2019

7 September 2019

Feb / May / Aug / Nov

1 June 2019

31 August 2019

7 October 2019

For monthly returns, the first MTDfV submission will be as follows:

First monthly filing date

Start of first return period subject to MTD

First month end within MTDfV

First MTD VAT return deadline (month plus 7 days)

April

1 April 2019

30 April 2019

7 June 2019

The only exceptions are for businesses in the deferrals category. These adopt MTD for VAT rules for their first VAT return period starting on or after 1 October 2019.

Q: Which businesses are subject to the deferral?

A: These are businesses that are: part of a VAT group or VAT division; based overseas; trusts; not-for-profit organisations not set up as a company; local authorities; public corporations; those making payments on account; annual accounting scheme users; and those using the VAT GIANT service. These businesses should have received written notification of their deferral status from HMRC.

Q: What if my business voluntarily registered for VAT?

A: If your turnover is below the VAT registration limit, you don’t have to enter MTD for VAT, and you can carry on filing as you do at present. But if you prefer, you can join MTD for VAT voluntarily

Q: Does my business have to do anything to get into MTD for VAT?

A: Yes. A business actually has to sign up to MTD for VAT. To do this, you need your Government Gateway user ID and password and VAT registration number. HMRC should confirm, by email, that your sign-up has been successful. Alternatively, we can sign up for you.

Q: Are there other deadlines to watch?

A: When you have signed up for MTD for VAT, HMRC will expect all future VAT returns to be submitted via MTD software. It is therefore very important that you have submitted any outstanding returns and are ready to file all future returns with MTD software when you sign up.

If you usually pay VAT by direct debit, you cannot sign up in the 15 working days before or five working days after sending in a VAT return.

Q: Are there penalties for getting MTD for VAT wrong?

A: MTD for VAT is backed up by a system of penalties. For the first year, however, HMRC intends to take a slightly more lenient approach on penalties for the issue of digital links between software products. Businesses are given until 31 March 2020 to have digital links in place between software products.

HMRC refers to this as a ‘soft landing’ penalty period. During this period, cut-and-paste will continue to be an acceptable way to transfer information to HMRC. For businesses in the deferral group, the soft landing penalty timetable is adapted to give them 12 months to become fully compliant in putting digital links into place.

However, there is an important exception to this. Where VAT return information is transferred out of the accounting records into a separate program for submission to HMRC via the Application Programming Interface (API), transfer must be digital. This would apply, for example, where figures for the VAT return are collated in a spreadsheet and then transferred into bridging software for final submission. The transfer from spreadsheet to bridging software must use a digital link.

These penalties are specific to MTD, and are in addition to HMRC’s other penalty powers.